Market Mechanics
Markets & Units
Every Midnight market is defined at creation by an immutable set of parameters: a chain ID, loan token, maturity date, accepted collateral assets (with oracles and LLTVs), and optional gates. Once created, these parameters never change. Markets are permissionless, which means anyone can create one. Understanding how a market is defined is essential before reading balances or constructing offers.
Market immutable configuration
GET /v0/midnight/markets/{marketId}
// Response — these fields are set at creation and never change:
{
"data": {
"chain_id": 1,
"market_id": "0xd92de5e7fbb...7614",
"loan_token": "0xa0b8...3c02", // USDC
"maturity": "1798761600", // Dec 31, 2026
"collaterals": [
{
"token": "0xC02a...6Cc2", // wETH
"lltv": "860000000000000000", // 0.86 → 86% LLTV
"liquidation_cursor": "250000000000000000",
"oracle": "0x1234...abcd"
},
{
"token": "0xcbBT...1234", // cbBTC
"lltv": "770000000000000000", // 0.77 → 77% LLTV
"liquidation_cursor": "340000000000000000",
"oracle": "0x5678...ef01"
},
{
"token": "0xwstE...5678", // wstETH
"lltv": "860000000000000000", // 0.86 → 86% LLTV
"liquidation_cursor": "240000000000000000",
"oracle": "0x9abc...2345"
}
],
"enter_gate": "0x0000...0000", // no enter gate
"liquidator_gate": "0x0000...0000" // no liquidator gate
}
}Market live state
To fetch the market’s current state (i.e. settlement fee, total units), use the following endpoint:
GET /v0/midnight/markets/{marketId}/state
// Response — these fields change as the market evolves:
{
"data": {
"chain_id": 1,
"market_id": "0xd92de5e7fbb...7614",
"total_units": "85000000000", // total units outstanding
"tick_granularity": 1, // valid ticks must be multiples of this
"settlement_fee_schedule": [ // settlement fee by time-to-maturity
{ "time_to_maturity_days": 0, "fee_cbp": "0" },
{ "time_to_maturity_days": 1, "fee_cbp": "50" },
{ "time_to_maturity_days": 7, "fee_cbp": "150" },
{ "time_to_maturity_days": 30, "fee_cbp": "400" },
{ "time_to_maturity_days": 90, "fee_cbp": "800" },
{ "time_to_maturity_days": 180, "fee_cbp": "1200" },
{ "time_to_maturity_days": 360, "fee_cbp": "2000" }
],
"current_settlement_fee_cbp": "743.5", // interpolated for current TTM
"current_settlement_fee_wad": "7435000000000", // same, WAD-scaled
"continuous_fee_rate": "158549000", // per-second ongoing fee (WAD)
"last_indexed_block": "47457420"
}
}Credit and debt units
Within a market, all positions are denominated in units. These units have a fixed payoff structure analogous to that of zero-coupon obligations, representing credit for lenders and debt for borrowers.
- 1 credit unit = a claim on 1 loan token at maturity (held by lenders)
- You buy units → your credit increases → After maturity, withdraw 1:1
- 1 debt unit = an obligation to repay 1 loan token (held by borrowers)
- You sell units → your debt increases → Before maturity, repay to close
To list a user's position in a market use the following endpoint:
GET /v0/midnight/users/{addr}/positions?market_ids=0xd92de5e7fbb...7614
// Response — a lend position:
{
"data": [
{
"chain_id": 1,
"market_id": "0xd92de5e7fbb...7614",
"user_address": "0xYourAddress...",
"loan_token": "0xa0b8...3c02", // USDC
"maturity": "1798761600", // Dec 31, 2026
"type": "lend", // lend | borrow | collateral_only | null
// Position state
"credit": "10500000000", // 10,500 units → 10,500 USDC at maturity
"debt": "0", // no debt (this is a lend position)
"pending_fee": "12000", // continuous fee accrued but not yet deducted from credit
"loss_factor": "0", // current market loss factor (bad debt)
"last_loss_factor": "0", // loss_factor already applied to this returned position
"collaterals": [], // lenders don't post collateral
// Performance (only on the list endpoint, not the detail endpoint)
"cost_basis": "952380952380952380...", // weighted avg price paid per unit (WAD)
"effective_rate_wad": "52000000000000000" // 5.2% annualized
}
]
}How rate emerges from price
Units always settle at 1:1 with the loan token at maturity. If you buy a unit for price P (where P<1), you earn the difference. The implied simple rate over the remaining term is 1 / P - 1.
Example: Buy a unit at P = 0.95 with 6 months to maturity:
rate = 1 / P − 1
= 1 / 0.95 − 1
= 0.0526 // → 5.26% over the remaining term
// → ~10.5% annualized (simple)You pay less than face value today and at maturity, you receive face value. The discount is your return.
In Morpho Blue, when you lend 1,000 USDC, you receive supply shares. The number of shares depends on the current exchange rate. As borrowers pay interest, the exchange rate grows, i.e. each share becomes worth more USDC over time (unless bad debt is socialized). Your share count stays the same, but the value per share floats upward. The rate is baked into the continuously changing exchange rate. All lenders in the same market earn the same rate, and that rate changes every block.
In Morpho Midnight, when you lend 1,000 USDC, you buy credit units at a specific price (say 0.9524 per unit). You get ~1,050 units. Each unit is always worth exactly 1 USDC at maturity. Your return is the gap between what you paid (1,000 USDC) and what you'll receive (1,050 USDC). The rate isn't embedded in the accounting, it was determined by the price you traded at. Two lenders in the same market can have different rates because they entered at different prices.
Fungibility and secondaries
Positions within a market are fully fungible. Because all positions within a market share the same maturity date, units created from different trades at different times are interchangeable.
This fungibility enables secondary markets. A lender doesn't need to wait until maturity: a lender can sell their credit units back into the market. A borrower can buy units to close out the borrower’s debt. The same market serves both entries and exits, deepening liquidity for everyone.
To track a user’s entries and exits in a market use the following endpoint:
GET /v0/midnight/users/{addr}/transactions
// Response event_types:
// lend → bought credit units (entered a lending position)
// exit_lend_primary → redeemed credit at/after maturity (1:1 withdrawal)
// exit_lend_secondary → sold credit units before maturity (early exit)
// supply_collateral → deposited collateral into a market
// borrow → took an offer / sold credit units (created debt)
// exit_borrow_primary → repaid debt
// exit_borrow_secondary → bought units to close debt (early close)
// withdraw_collateral → withdrew collateral from a market
// partial_liquidation → position partially liquidated (pre-maturity, RCF-capped)
// full_liquidation → position fully liquidated
// Each event includes: assets, units, maker, taker, buyer, seller, tx_hashYou can also choose to filter specific transactions (i.e. lending) and get a subset of event types in the response:
GET /v0/midnight/users/{addr}/transactions
?event_types=lend,exit_lend_primary,exit_lend_secondary